U.S. economy shows resilience with fewer negative surprises

Reuters Staff

3 Min Read

NEW YORK (Reuters) - The U.S. economy may be gaining some traction after a dismal first quarter, according to Citi Research’s gauge on economic data surprises that showed fewer reports lagging economists’ forecasts.

The logo of Citibank is seen on a board at the St. Petersburg International Economic Forum 2017 (SPIEF 2017) in St. Petersburg, Russia, June 1, 2017. REUTERS/Sergei Karpukhin

Citi Research’s gauge on Friday turned the least negative since early May as unexpectedly strong data on domestic manufacturing offset weaker-than-forecast readings on non-farm payrolls and consumer sentiment.

The Citi barometer .CESIUSD, a measure of economic data that can come in weaker or stronger than forecast, is monitored by traders for the U.S. growth trajectory. It came in at -18.2 on Friday, matching a level last seen on May 5. It stood at -23.1 on Thursday.

Fewer downbeat reports do not guarantee actual economic strength, but they help foster optimism or at least reduce pessimism among traders and investors.

The index fell to its lowest level since July 2011 on June 26 when it hit -78.5.

The index’s upturn stemmed from further improvement in the labor market and a bounce in manufacturing from a weaker dollar and stronger global demand.

It is unclear, analysts say, how damage to production and shipping in the Gulf of Mexico region from Hurricane Harvey, the most powerful storm to hit Texas in over 50 years, will end up hurting business activity nationwide in the third quarter. They said the same about whether rebuilding efforts in its aftermath may boost growth in the fourth quarter and beyond.

“On net we think the GDP impact from Hurricane Harvey to be positive over time as the activity during the reconstruction phase are likely to offset the lost activity. However, this does not necessarily mean that the economic effect is positive,” Bank of America Merrill Lynch economists wrote in a research note on Friday.

Gross domestic product in the second quarter was revised to 3.0 percent, its fastest pace in over two years, on solid consumer spending and business investment, the government said on Wednesday.